The Importance of Capitalism in Business

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Business 1050
Fall 2012

What Does Capitalism Mean in Business?

Capitalism can be defined as the “ideal” economic environment for business as it benefits society in many ways. Some of these are freedom, productivity, ingenuity and equality. Capitalism also relies on basic instinct, is constitutionally sound, and stimulates economic growth.

I make an important distinction between “ideal capitalism,” a term used by Karl Marks and others as an endorsement of communism and modern day capitalism, which is addressed here.

Capitalism is most often defined as an economic system where individuals have ownership of economic resources and make decisions relating to their own self-interest. Also referred to “laissez-faire,” a capitalistic economy consists of private business owners who share a common goal; to prosper from the public’s demand for various goods and/or services and keep the lion’s share of the business profits for themselves. The term “free market is often used as another term for capitalism, however free market is an element of capitalism that determines production, prices for goods and services and distribution.

There seems to be a common thread among anti-capitalists; the assumption that the decision-makers derived from successful capitalist ventures act solely in their own best interest. This idea, in itself, is irrational, as the success of business depends on the general public’s need for products and services.

Capitalism allows for freedom of choice. In contrast to Plato’s Republic, where people are relegated to a particular station/rank within society by an elite group of “those in charge,” capitalism allows for individual to choose his.her own station in life. Utilizing land, labor, and capital to produce valuable consumer goods or services, capitalists often endure significant financial and personal risk when building businesses. This risk generates incentive for the business owner to profit from supply and demand in the marketplace....
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